Hindenburg Research claims Jack Dorsey's payments firm Block overstated user counts
Hindenburg Research targets Twitter co-founder Jack Dorsey's payment firm Block: The short-seller said in a note on its website that its two-year-long investigation has concluded that "Block has systematically taken advantage of the demographics it claims to be helping."
Hindenburg Research targets Jack Dorsey's payment firm Block: Hindenburg Research revealed its latest target on Thursday, saying that it held short positions in Block Inc, alleging that the Jack Dorsey-led payments firm overstated its user counts and understated its customer acquisition costs.
The short-seller said in a note on its website that its two-year-long investigation has concluded that "Block has systematically taken advantage of the demographics it claims to be helping."
"Our research indicates, however, that Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual," the note said.
"Core to the issue is that Block has embraced one traditionally very “underbanked” segment of the population: criminals. The company’s “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly," it added.
As per Ortex data, about 5.2% of Block's free float shares were in short position as of March 22, Reuters said, adding that shares of Block fell 18% in premarket trading after the report.
Block Inc., founded by entrepreneur and Twitter founder Jack Dorsey in 2009, offers payment and mobile banking services for merchants and consumers.
The company, which was earlier named Square, worked on and expanded the idea that a tiny card reader that could plug into a smartphone’s headphone jack could enable artists and vendors to take credit card payments. But, as per Hindenburg, instead the company has shown "willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics".
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